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SEC May Seek More Input
On Mutual-Fund Rule

WASHINGTON -- Securities regulators may reopen for public comment a mutual-fund governance rule that a federal appeals court sent back for review earlier this month.

Securities and Exchange Commission Chairman
Christopher Cox
told reporters after testifying before the Senate Banking Committee that he expects the agency to reopen the rule requiring 75% of a mutual fund's board members, including its chairman, to be independent from conflicts of interest. Earlier this month, an appeals court said the SEC didn't allow adequate public comment on the costs of implementing the rule and gave the agency 90 days to act or have the rule declared invalid.

"That's the direction we're going," Mr. Cox said, adding that the SEC likely would make an announcement in the next few days.

In testimony before the banking panel, his first since becoming chairman in August, Mr. Cox reviewed his priorities and their focus on improving the flow of information to investors by translating corporate filings into plain English; simplifying accounting rules; improving access to corporate and mutual-fund information over the Internet; and stepping up enforcement of scams that target the elderly.

Mr. Cox explained how the SEC will address senators' concerns about keeping U.S. capital markets competitive as overseas exchanges snag market share. Companies are raising money on non-U.S. stock exchanges, with some citing the 2002 Sarbanes-Oxley corporate-governance law as one impediment to raising money in U.S. markets.

Mr. Cox said he and regulators of non-U.S. exchanges are seeking a solution to how merged exchanges would be regulated before cross-border deals are struck. He said such mergers are "inevitable," and "one of the key questions that needs to be answered is whether the trading platforms will be merged." Mr. Cox said he planned a retreat with members of Britain's financial regulator to discuss regulatory issues. After the hearing, he said he hoped the meetings would help to address whether the regulators should update rules or seek legislative answers. "We need to keep our eye on this ball," Mr. Cox said.

He said the agency's approval of the New York Stock Exchange's structure, with its regulatory arm as a subsidiary of the for-profit exchange, was a "beginning, not an end" and expressed his belief that regulators need to be "independent and arm's length." Lawmakers have held hearings on the future of self-regulatory agencies, many of which operate as for-profit entities.

The SEC, which lawmakers have criticized for dragging its heels on updating its system for registering and examining the credit-rating agencies, says that it needs regulatory authority to implement the kind of increased oversight that many companies and investors say is needed. The SEC has designated five firms as "nationally recognized statistical rating organizations."

Congress is poised to push legislation that would increase industry oversight and make it easier for more rating firms to be registered to compete in the business.